France

The French pride themselves on having been spared the excesses seen in the US and elsewhere in the sub-prime crisis. "In France there is no credit crunch," the head of BNP Paribas, Baudouin Prot, said recently, using its English name as if to emphasise its Anglo-Saxon origin.

He praised the responsible behaviour of French banks within a tightly regulated system but acknowledged there had been an impact due to the rise in the cost of borrowing, slower growth and a fall in demand among borrowers.

The housing market has been hit hard. Sales of new properties have fallen by 28%, according to government figures. France Info, a national radio station, recently devoted a day to the property crisis, featuring estate agencies forced to close because of the collapse in business. The Institut National de la Statistique et des Etudes Economiques (Insee) said this month that tight credit had contributed to a plunge in new construction work, which in turn had begun to undermine growth. However, unemployment is 7.2% - the lowest for 25 years - and a further drop to 7.1% is forecast by the end of the year.

"Le pouvoir d'achat" - spending power, or rather the lack of it - has long been a French preoccupation. President Sarkozy's failure to make headway, having vowed to do so, is one reason why his popularity has fallen. Insee's latest survey of household confidence suggests that it is at its lowest level since records began 20 years ago.

The government has fought back with an ad campaign on TV and the internet that heralds measures it claims are putting more money in people's pockets. Happy French families are shown building houses and shopping thanks to tax breaks. "Month after month, we'll win the battle of purchasing power," is the slogan. Insee may have something to say about that.

Germany

While its economy is in a fairly robust state thanks to strong demand for its exports and a solid manufacturing sector, inflationary pressures are eating away at consumer confidence in Germany as much as anywhere else in Europe.

Confidence has fallen to a three-year low, the GfK institute found, leading analysts to conclude that Germans - prudent consumers at the best of times - are tightening their belts in preparation for harder times to come. Inflation, which was about 3% in May, is expected to hit 3.3% this month - the biggest rise for about 12 years. "Germans are avoiding big purchases," the GfK stated, halving its forecast for consumer spending growth this year to 0.5%.

The reasons for Germans' reluctance to spend are down to petrol and diesel prices, which have doubled over the past year, and increases in food costs and energy bills, along with fears of further inflation, the crisis in the financial markets, a strong euro, and the general worldwide downward trend.

The dark mood has been compounded by news that Germany's Ifo business index has also hit a two-and-a-half year low this month. "Germans are viewing this all very pessimistically," the GfK concluded. "Repeated announcements of new record petrol and diesel prices have compounded consumer fears of a loss of purchasing power."

Even though the economy remains strong, Germans fear that it will not stay that way, amid widespread worries that the American slowdown and the weak dollar will certainly have repercussions. A strong euro is not seen as a good opportunity to go on a cheap shopping spree to New York, rather as a cause for much worry about exports.

Being one of the most credit-wary nations in Europe (many Germans do not own a credit card and it has one of the lowest rates of house ownership on the continent), even Germans who are not yet affected by rising prices would rather put money aside for a rainy day.

Elsewhere in central and eastern Europe, where most countries have enjoyed exponential growth in recent years, it is the property markets that are taking the most substantial hits.

House prices have fallen by 10% in Estonia and by 20% in Latvia this year. Poland, Hungary and Lithuania have not escaped the drift downward, though falls have been less dramatic.

But Poland is bucking the trend. It is enjoying healthy growth, a strong zloty and rising wages, and is hampered only by a huge labour shortage. Put in the context of the British downturn, it has suddenly become very attractive for many Polish migrants - whose infusion of cash has already boosted growth and consumer spending - to return home.

Italy

Italian banks were always parsimonious about handing out loans and Italians traditionally dislike credit. This means Italy could escape the worst effects of the credit crunch, said Pierpaolo Benigno, an economics professor at Rome's Luiss University. "Lending to companies, which has been well monitored, remains consistent and although private mortgages have dipped, that's due to rising interest rates. There is no fallout from the credit crunch here."

Consumer lending is now on the rise but Italy has some catching up to do, said Benigno. "Banks are traditionally more familiar with the people they lend to and are more vigilant, and there remains a cultural bias against credit."

But crunch or no crunch, Italians are suffering from soaring food and fuel prices, with consumer spending dropping 2.3% year on year in April. Shoe purchases were down 6.4%, while supermarkets report Italians are abandoning the Mediterranean diet they made famous for cheaper frozen foods.

The daily newspaper Corriere della Sera summed it up last week as "The Italian paradox - fewer debts, greater pessimism". Italians, it said, now faced the "Syndrome of the fourth week" as fridges are emptied before payday.

The employers' group Confindustria believes economic growth will hover at about 0.1% this year, well below the 0.5% predicted by the government, and business confidence fell to a three-year low in June, as Italy's legions of small manufacturers fear for the prospects for domestic and foreign sales.

Car crashes are reportedly decreasing in the capital at the end of each month as car-mad Romans run out of money to buy petrol, while managers at one low-cost supermarket run by a charity in Rome's suburbs were surprised to see far more Italian than immigrant families showing up for cut-price food.

House prices did rise by about 1.6% in the first six months of the year, the economics institute Nomisma said, but house sales are set to fall this year by 5%-6% compared with 2007. Benigno said: "There is a stability in house prices right now because both supply and demand have fallen but demand is now set to fall faster, with prices in the suburbs the first to fall."

Spain

After years of easy living, when growth in Spain outstripped its European neighbours, things are getting a lot tougher. But the prime minister, José Luis Rodríguez Zapatero, who has been loth to describe the country's economic slowdown as a crisis, said this week that GDP would rise by only 2% next year.

In a bid to balance the budget, public sector recruitment will be cut by 30% and top officials' salaries will be frozen. The government was also forced to admit that unemployment forecasts for next year would be closer to 11% than the 10% previously expected.

The state surplus has dropped 80% to €2.77bn (£2.2bn) for the first five months of the year, against almost €13.6bn in state coffers for the same period of 2007. This has forced the government to tighten its belt after the downturn in construction led to a sharp fall in tax revenue. House sales dropped 32% in the first quarter and construction output fell 8% in 2007, according to Eurostat, the EU statistics body, compared with a fall of 2.9% in the UK.

Up to March, the value of mortgages issued was some €17bn, against €41.2bn a year before. And the number of borrowers defaulting on home loans shot up to 1.3% in April - an eight-year high after 10 consecutive months of rises.

Banks are in a cut-throat battle to steal each other's clients. Clients at banks with good credit histories are being targeted with low-interest rate mortgages by rivals to get them to jump ship.

There is also grim news from the high street. Inflation is above the eurozone average: prices rose at a annual rate of 4.6% in May - a 13-year-high. As the summer sales start, shops are cutting prices by 50% or more to entice customers. A Barcelona glass shop was offering ornaments at up to 60% off.

With sales falling, the buzzword in Spain is cost-cutting. At Audi España, cars and mobile phones are being taken from employees on maternity leave as the firm becomes "mad to save money", according to a source at the company.

Across the border in Portugal, things are little better. After sharp growth in the late 1990s, unemployment fell to 3.8%. But now the current account deficit is 8% of GDP and unemployment reached 7.6% in the first quarter. GDP fell in two of the past three quarters.

Ireland

Even France's august ambassadorial residence in Dublin has become a casualty of the economic downturn.

The French government had put the house, set in a half-hectare garden on south Dublin's smart Ailesbury Road, on the market in January for about €60m (£45m). Yet in six months the price of the house has dropped dramatically by €10m - just one example of the collapse in confidence in the property market.

The Irish economy is on the verge of its first recession since the hard times of the late 1980s, when the republic suffered mass unemployment and emigration. The once burgeoning building industry, which turned Dublin's real estate into one of the most expensive on the planet, has almost ground to a halt. Employment in the sector is reported to be down by 14% in April. Housing completions have dipped from 93,000 in 2006 to less than 35,000 this year, while Irish estate agents have asked its staff to accept 10% pay cuts.

The drop in the number of houses built is estimated to provide €1bn less in taxes for the Irish exchequer, which in turn may have an impact on huge state road, rail and infrastructure projects under the National Development Plan.

The Economic and Social Research Institute, a respected Dublin thinktank, says the economy will shrink by 0.4% - unthinkable in the double-digit growth years of the Celtic Tiger. The ESRI also predicted this week that Irish consumer spending, after the shopping spree decade of excess, would fall by 2.6%. It even resurrected the spectre of emigration: predicting 20,000 people would leave next year, something not seen for 18 years. The unemployment rate is also expected to increase next year to about 7.1% of the workforce, it warned. Nor has Brian Cowen's embattled government, which is still reeling from defeat in the Lisbon Treaty referendum a fortnight ago, much scope to spend its way out of a recession. Falling tax revenues will leave a €7.4bn hole in public finances, the ESRI said.